6 August 1999

UKdairy trade shock at swingeing super-levy bill

By Robert Harris

DAIRY farmers have been hit with a super-levy bill of more than £9m for last milk year, the Intervention Board has revealed.

The size of the bill has caused a storm of protest, since output was revised upwards by 21m litres taking the total overshoot to almost 38m litres. This adjustment adds over £5m to the super-levy bill, making a provisional total of £9.3m.

It is the latest in a catalogue of errors to beset the 1998/99 figures, and is a devastating blow to hard-pressed dairy farmers, says broker Ian Potter. "This is an absolute sham. Farmers and consultants have lost total confidence in the figures."

All milk production figures should be immediately and independently audited and verified, he adds.

Analyst Michael Seals also admits to surprise. "I find the whole process remarkable. Purchasers buy milk from farmers, the volume of milk is measured to the last part of a litre, the farmer is paid monthly. How come the figures submitted to the IB are constantly revised?"

Chris Collins, IB group manager of milk quotas, says the board uses annual returns by dairy companies to calculate super-levy rather than the monthly statistics used to track production during the year.

"The monthly statistics are a guide only. We have always said that. They are not a proxy for the super-levy calculation. To guarantee no super-levy bill, farmers have to ensure they stay within their own quota allowance."

He insists the figures should be kept in context. "We were 0.13% over quota; the adjustment takes that up to 0.27%. We are talking very small amounts, about 13m litres before butterfat adjustment or half a days supply, compared with 13.7bn litres for the year." Charles Holt of the Farm Consultancy Group predicted that the UK would end up over quota, though not by this amount. "But super-levy should only affect those who are well over quota," he says.

This is because thresholds – the point at which companies dock suppliers 24.36p/litre for excess milk – will generally be higher this year, given that the super-levy bill is only about a third of last years level.

And about half of purchasers, including United Dairy Farmers, were under quota, so spare capacity will be redistributed to over-quota companies.

Milk Marque says its threshold will be 15%, and few producers will have to pay super-levy, says a spokesman. Scottish Milk has set a threshold of 3.84%.Unigate and Express are also over quota, though neither had threshold information when FW went to press. &#42

Two dairies face axe from Express

EXPRESS Dairies is to shut two dairies included in last months purchase of Glanbias UK liquid milk operations.

The Island Road UHT milk processing plant in Birmingham will close by the end next month, with a loss of 70 jobs. Manchesters Hyde Dairy plant will follow suit in November, where 330 jobs will go.

The company said 130 new jobs would be created at its Liverpool, Manchester and Wakefield sites.

Chief executive, Neil Davidson, said Glanbia had been acquired to reduce overcapacity and optimise dairy utilisation. "The measures we are proposing today will enable our Manchester and Liverpool dairies to operate at maximum efficiency," he added.

A spokeswoman for Express said the company would continue to buy the same quantity of milk from the same farmers. Supplies to the Island Road plant will be switched to Expresss Ashby plant in Leics.

But the company now has 13 milk purchasing contracts in place following the Glanbia acquisition, and these will be reviewed as they come up for renewal, she added. &#42

Genus to buy ABS

GENUS is set to acquire leading US cattle breeding company ABS, a move which would create the worlds number one cattle genetics outfit.

The firm fought off bids from several other companies, and completion of the cash deal is expected towards the end of September subject to checks and legal documentation. Combined annual semen sales will top £75m.

"This is a huge breakthrough for the group," says Richard Wood, Genus chief executive. "It will create exciting opportunities for the division after years of operating in a declining domestic market."

An acquisition of this size will mean detailed changes to the business forecast, so it is likely to delay Genuss planned full stock exchange flotation to early next summer, says Mr Wood. &#42

Bumper crop… A hot, dry start to the week saw this Riband cut at 13% moisture content at Richard Baileys Park Farm, Bodiam, East Sussex. Wheats are averaging 9.63t/ha (3.9t/acre), about 10% ahead of budget, says Mr Bailey. He hopes the crop will make £1-£2/t premium at a local feed mill. UK feed wheat prices were little changed midweek, at £70-£72/t ex-farm. Confidence in the French crop has grown and prices reached intervention values, supporting the home market.